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Universal S E A Ltd (USea) uses process costing and FIFO (First-In-First-Out) cost flow systems. Products are processed sequentially in department G and department K
Universal S E A Ltd ("USea") uses process costing and FIFO (First-In-First-Out) cost flow systems. Products are processed sequentially in department G and department K before transfer to the finished goods warehouse. Given below is cost information for department K. for the month of July 2015: The cost of WIP in department K at 1 July was $69,000, which consisted of 8,000 units that were 90% complete. During July, a total of 107,000 units were started and 99,000 units were completed and transferred out. At the end of July, 10,000 units remained uncompleted. The ending WIP inventory was 50% complete. In department K, direct material and transferred-in costs are added at the beginning of the manufacturing process whilst conversion costs are incurred evenly throughout the manufacturing process. Inspection in department K takes place when the products are 80% complete. Normal spoilage is set at 4% of good units produced. Required: (a) Compute the cost per equivalent unit for each product cost category in department K. for the month of July 2015. (b) Calculate the unit product cost of goods transferred to the finished goods warehouse at the end of July 2015 from department K.. (Give your answer to the nearest cent). (c) Write a journal entry to record the abnormal spoilage for the month of July 2015 in department K. (Narrations are not required) (d) Spoilage costs should not be included as part of product cost. Do you agree? Explain
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